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Newport News, Virginia-based Huntington Ingalls Industries, Inc. (HII) designs, builds, overhauls, and repairs military ships in the United States. With a market cap of $10.9 billion, Huntington Ingalls operates through Ingalls, Newport News, and Mission Technologies segments.
Shares of the defense major have outperformed the broader market over the past year. Over the past 52 weeks, HII stock gained 27.9%, while the S&P 500 Index ($SPX) returned 26.1%. However, in 2024, HII stock is up 7.9%, lagging behind SPX’s 17.2% gains on a YTD basis.
Zooming in further, HII has outpaced S&P Aerospace & Defense SPDR’s (XAR) 26.9% returns over the past 52 weeks but is trailing behind the exchange-traded fund’s13.2% gains on a YTD basis.
Shares of Huntington Ingalls dipped 4.6% after the release of its Q2 earnings on Aug. 1. Despite reporting a robust 6.8% annual growth in sales and service revenue to $3 billion and a staggering 32.1% surge in comprehensive income to $177 million, the company’s profitability has remained a concern. Although it exceeded Wall Street’s top and bottom-line estimates, its modest operating margin of 6.3% has failed to impress investors.
For the current fiscal year, ending in December, analysts expect Huntington Ingalls to report a 3.1% annual EPS decline to $16.55. However, the company’s earnings surprise history is robust. It surpassed the consensus estimates in each of the past four quarters. Its EPS of $4.38 for the last reported quarter surpassed the consensus estimates by 23.4%.
Among the eight analysts covering the stock, the consensus rating is a “Hold,” a step down from the “Moderate Buy” rating a month back. That’s based on three “Strong Buy” ratings, three “Holds,” one “Moderate Sell,” and one “Strong Sell.”
This configuration is slightly less bullish than a month before when four analysts advised a “Strong Buy” rating.
On Aug. 15, Bank of America Securities (BAC) analyst Ronald Epstein maintained a “Sell” rating with a price target of $250. Epstein highlighted the persistent labor challenges, inefficiencies in the shipbuilding segments, and low operating margin as a few of the reasons for the rating.
Although HII’s mean price target of $280.67 represents a marginal premium from current price levels. The Street-high target of $310 indicates a potential upside of 10.7%.
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
